Having rallied over 200 percent in the past year, Square's stock sets itself apart by its ability to bonce back from seemingly devastating declines, CNBC's Jim Cramer said on Tuesday.
Speaking from CNBC's 1Market in San Francisco, the "Mad Money" host decided to look into Square's resilience and explain what's kept the stock afloat.
"Not once, but twice in the last four months, this stock has been hit with fierce declines," Cramer said. "Both times it seemed like the beginning of the end for Square, and both times the stock managed to turn things around, coming back with a vengeance."
Square's new cryptocurrency connection ignited its stock, which surged to new highs and suddenly started trading in lockstep with bitcoin.
"To me, this is a ridiculous linkage," Cramer said. "Square has enough going for it that it doesn't need this tenuous connection to cryptocurrencies to power its stock to new highs."
"I think the best thing they could do would be to figure out a way to decouple from Bitcoin, which is incredibly volatile and really has very little to do with the core business," he recommended.
For Cramer, Square's true catalysts are associated with its core business. First, its competition is sparse; neither Apple Pay nor PayPal's Venmo have grown enough to make Square irrelevant.
Square also turned profitable much sooner than people expected, reporting a profit last August and guiding toward earnings growth of 45 cents per share in 2018. Better yet, each blowout earnings report has sent the stock soaring.
"The company's been mixing its lucrative, high-margin subscription services that it offers to small businesses with healthy transaction growth, and the combination has made the stock incredibly attractive," Cramer said. "That's a major reason why, over the past six months alone, Square's stock has nearly doubled."
The bitcoin problems did cause some pain for Square's stock, however. Even though Square was simply running tests to gauge how much its customers cared about being able to process cryptocurrency transactions, according to CFO Sarah Friar, it got caught up in the bitcoin mania.
Dorsey, Square's CEO, exacerbated the issue by aggressively promoting Square's bitcoin connection, Cramer said. After the stock's first bitcoin-driven plunge in December, Dorsey sent out a tweet promoting a new capability in Square's Cash app to instantly buy and sell bitcoin.
"We support Bitcoin because we see it as a long-term path towards greater financial access for all," Dorsey wrote in January.
The tweet sent shares of Square on another roller-coaster ride, surging to over $46 a share before sliding back down to $39 by the market's bottom on Feb. 9.
"Here's where I come down: I adore Square," Cramer said. "It's got fabulous fundamentals [and] a great long-term growth story. What I don't adore is how the CEO got overly promotional about using Square's platform to trade bitcoin, and now the stock has all these irrational moves that scare investors away."
Cramer recommended that Square executives downplay its bitcoin connection, saying that the company's forecast of 37 percent revenue growth in 2018 is already a great story.
"On the other hand, all of this volatility in Square has given you two amazing opportunities to buy the stock into weakness, so if Jack Dorsey wants to keep flogging the cryptocurrency connection, you might get another chance to buy this stock into unjustified weakness," he said.
"The bottom line? When you buy a stock, make sure you're owning it for the right reasons," the "Mad Money" host concluded. "Square has some fabulous technology and even better numbers; maybe someday the bitcoin connection will have a material impact on the business, but until then, remember that when this stock sells off based on volatility in cryptocurrencies, that's a reason to buy Square, not to dump it."